SLVREC explores battery storage, by Eric Eriksen

Every fall, Valley farmers do something smart with the potato harvest: they don’t sell it all at once. They put it in storage and sell when the market calls for it. Timing, storage and patience are how a good crop becomes a good year. It turns out the same idea may work for electricity— and it could put real money to work for our cooperative.

With a $50,000 grant award from the State of Colorado — and we are grateful for it — SLVREC recently completed a feasibility study asking a practical question: could a large battery create financial value for our members by storing electricity and selling services back to the larger power grid?

What the study looked at
The industry calls it a BESS, short for battery energy storage system. In plain terms, it is a battery that stores electricity when it is plentiful and releases it when it is needed most. A BESS can range from small scale (a single building) to large scale (our distribution grid).
The study examined batteries between roughly one and four megawatts, with the final size depending on cost, program rules, engineering and siting. It also analyzed how a BESS system would be used— peak shaving and Tri-State’s Demand Response (DR) program. In addition the study reviewed financial assumptions, ownership options and how a project would fit into SLVREC’s long-term planning.

Encouraging early results
The numbers are encouraging. The study recommends that SLVREC keep evaluating a battery project because it appears to be in the financial interest of our member-owners — and that conclusion held up even when battery costs were tested across low, medium and high scenarios. Based on the results so far, the best value appears to point toward a four-megawatt battery, which is now the focus of our continued study efforts.
Here is the part that surprised me. The biggest value would not come from using the battery to trim our own peak demand. 

It would come from Tri-State’s DR program, our wholesale power supplier, paying SLVREC to keep the battery ready to support the larger grid when called upon. For a one-megawatt battery, that could mean more than $200,000 a year in additional revenue above expenses— real money that helps ease pressure on rates for every member. This increases as we look toward a four-megawatt battery. Depending on how Tri-State finalizes its new program rules, we may also be able to use the battery to avoid some wholesale power charges.

The study also compared ownership paths: owning the battery ourselves, buying its output from a developer or leasing it. Owning may capture the most long-term value for members, but it requires capital investment and careful review by management and our Board. No decision has been made.

Why it matters for the Valley
I want to be straight with you about what this project is— and what it is not. This is first and foremost a financial opportunity, not a backup power plan. A battery in the one-to-four-megawatt range is not big enough to carry the Valley’s critical loads through an outage, though depending on where it is built, it might help some. Siting still needs to be decided, and that decision will shape whatever extra benefits are possible.

The real prize is what the battery could earn. Payments from Tri-State, plus the potential to avoid some wholesale power charges, would flow back to the cooperative— and because SLVREC is a not-for-profit cooperative, that value flows back to you as member-owners. For a Valley built on agriculture and small businesses, where every dollar on the electric bill matters, that is an opportunity worth studying carefully.

That is why we are also looking closely at financing. If the numbers continue to hold up, the next question is how to fund a project in a way that protects members and keeps the cooperative in a strong financial position.

USDA PART application and project funding
In addition to the feasibility work, SLVREC has submitted a letter of interest to the U.S. Department of Agriculture’s Rural Utilities Service for consideration under the Powering Affordable Clean Energy or PART Program. In plain terms, this is the first step in asking USDA to consider low-cost federal financing for a battery project that could help create long-term value for SLVREC members. The application describes a proposed SLVREC Renewable Energy Optimization Battery Energy Storage and Demand Response Project near our Penitente Solar facility and La Garita Substation in Saguache County. The project currently under consideration is a utility-scale lithium iron phosphate (LFP) battery energy storage system rated at approximately four MW with 20.4 MWh of beginning-of-life storage capacity. It would be interconnected to SLVREC’s distribution system and operated to support demand-response participation, reduce wholesale demand costs, make better use of renewable energy resources and provide added flexibility for the cooperative system. The physical footprint will be minimal, roughly equivalent in size to two 40-foot shipping containers, with limited visual impact.

The estimated total capital cost of the project is $13.444 million. SLVREC requested approximately $10.083 million through a USDA PART Project Loan, representing about 75 percent of project costs, with the remaining $3.361 million, or 25 percent, proposed as cooperative cash equity. This program also allows up to 40 percent of the 75 percent USDA PART Project Loan to be forgiven. If approved and ultimately recommended by the Board, these funds would support procurement, installation, interconnection and other capital costs needed to place the battery into commercial operation. The purpose of pursuing this low-cost federal financing is simple: reduce the up-front cost of the project, preserve more value for members and help reduce upward pressure on future electric rates.

Next steps
The feasibility study is one step in a longer process. Next, we will evaluate potential locations, follow Tri-State’s program rules as they are finalized, update the financial model, review engineering and permitting needs and compare ownership and financing options. We will also seek proposals from qualified partners so we can understand costs, risks and benefits before any recommendation goes to our Board. If all goes well, a project could be completed as early as 2028.

We are still early, and no final decision has been made. But this kind of careful planning is exactly what a member-owned cooperative should be doing— looking ahead, asking good questions and always coming back to the one that guides every decision we make: What’s best for members?

The future is bright for San Luis Valley Rural Electric Cooperative members, and putting a battery to work earning value for the membership may be one more way we keep improving that future together.
Feel free to stop in to say hi, write me at eeriksen@slvrec.com, or call anytime at 719-852-6630. I always look forward to hearing from you.